Final Arguments In The Battle Between Argentina And Hedge Fund Billionaire Paul Singer Are Today

NEW YORK, Feb 27 (Reuters)
- Argentina will seek on Wednesday to persuade a U.S. appeals
court to reverse an order that it pay $1.3 billion to a group of
dissident bondholders stemming from the country's 2001 default, a
showdown that could have wide impact on global debt markets.

The arguments at the 2nd U.S. Circuit Court of Appeals in New
York are being closely watched amid fears of a new Argentina debt
crisis if the country must pay the so-called "holdout" investors.

For years, the holdouts have demanded full payment after spurning
two debt exchanges. Led by Elliott
Management affiliate NML Capital Ltd and Aurelius Capital
Management, they say they are simply attempting to hold Argentina
to its obligations and that the country has plenty of reserves to
pay them. (For details, click here: )

Argentina, though, calls these investors vultures and has vowed
not to pay them. A victory by the holdouts, Argentina argues,
would harm investors who agreed to the debt restructurings as
well as banks that handle its payments. The country also says
such a ruling could make future debt crises "unresolvable" and
spur further investor litigation.

A decision against Argentina would deal a major blow to President
Cristina Fernandez. As a sign of the importance of the court
hearing, Argentina's Economy Minister Hernan Lorenzino is
planning to attend the hearing, his spokeswoman said Tuesday.

A three-judge panel is set to hear arguments from lawyers for
Argentina and for the holdouts, as well as several other parties.

Argentina defaulted 12 years ago on about $100 billion in
sovereign debt. About 92 percent of its bonds were restructured
in 2005 and 2010, giving holders 25 cents to 29 cents on the
dollar.

If ordered to pay the small group of holdout creditors, there are
fears that Argentina could default again on $24 billion in
previously restructured debt.

U.S. District Judge Thomas Griesa in New York ruled in February
2012 that Argentina violated a key provision of its bond
contracts. That provision required the country to treat all of
its creditors equally by paying the holdouts if it also paid
investors who had agreed to the two debt swap deals, the judge
found.

In October, the 2nd Circuit largely upheld that ruling. It is now
reviewing Griesa's plan for how the payments would work. Griesa
has said the next time Argentina made an interest payment to the
exchange bondholders, it would have to pay $1.33 billion owed to
the holdouts into a court escrow account.

The appeals court is also examining treatment of Bank of New York
Mellon, which acts as trustee to the exchange bondholders, and
the impact from the ruling's injunction on other third parties.

In their appeal, Argentina's lawyers have contended U.S. courts
do not have the authority to order a sovereign government to turn
over assets to bondholders.

But Henry Weisburg, a lawyer at Shearman & Sterling who has
followed the case, said Argentina made similar arguments during
its last hearing before the appeals court. And he also noted the
appeal will be heard by the same panel that issued the October
ruling backing Griesa.

"You have to wonder what traction they'll have the second time
around," he said of Argentina.

In court papers, lawyers for Argentina have said the country
would be willing to reopen its restructuring offer. Such a move,
though, would require legislative permission and likely be
rejected by the holdouts.

Argentina is separately awaiting a decision on whether the court
will grant a rehearing of the October decision that required
equal treatment of the holdout investors.

The U.S. government has backed that appeal, saying if the ruling
is upheld, it could undermine the ability of other governments to
negotiate future debt restructurings.

The appeals court's ultimate decision after Wednesday's hearing
could be the final word on the matter. Although the court could
end up rehearing the case or the Supreme Court could ultimately
take up the case, such reviews are rare.